Optimizing the design of a loyalty program

Aeroplan is one of the biggest loyalty programs in Canada with more than five million members. In exchange for their participation in the program the members are offered miles each time they make purchases from the Aeroplan partners. Those miles can then be used by the members as an alternative currency allowing them to buy a variety of products and services offered by the pool of partners. The purpose of our work within the The Ninth Montreal Industrial Problem Solving Workshop was to develop a methodology for optimizing the design elements of the loyalty program, i.e., maximizing profitability of the program and its attractiveness and value for its members over the long term. Our team’s goal was to build a conceptual model that would integrate key program dynamics in a game theory framework.